The unemployment rate in the United Kingdom held steady at 4.9% during the three months ending in June, according to the latest figures from the Office for National Statistics (ONS). This outcome was a setback for Prime Minister Andy Burnham's administration, as economists had anticipated a modest fall to 4.8%.
The ONS data also indicated a decline in job vacancies, which have now reached their lowest level in over five years. Early estimates suggest a decrease of approximately 6,000 vacancies between May and July compared to the preceding February-April period. This downturn is attributed, in part, to smaller businesses citing increased labor costs and other operational expenses as reasons for not hiring new staff or replacing departing employees.
Furthermore, regular wage growth in the UK's private sector slowed to 2.8% in the three months to June, marking the lowest rate since October 2020. This figure falls short of the 3.4% economists had projected. Despite this private sector slowdown, overall regular wage growth saw a slight increase to 3.5% from 3.4% in the previous quarter. After accounting for Consumer Prices Index (CPI) inflation, the real wage growth was 0.7% higher.
Public sector pay growth, however, remains elevated due to recent National Health Service (NHS) pay awards, according to ONS director of economic statistics Liz McKeown. The Bank of England is closely monitoring these economic indicators, particularly in light of potential inflation pressures stemming from global events, such as the recent conflict in Iran affecting energy prices. Financial markets are currently pricing in a 0.25 percentage-point interest rate hike by the end of 2026, with the base rate standing at 3.75%.